Paid back sign on-bonus W-2c

[rehan661262]

Situation: 

- In 2021 June I joined and left in 2022 Jan and needed to pay back the sign on bonus since I was there less than a year

- On the contract i recieved 18.5k relcation and 25k sign-on. They asked me to pay back 57k with the breakdown shown: Sign-on: 25k, relocation: 18.5k, taxes: 14,202

I paid back the amount in 2023 and they said the following: "

Please note next steps after repayment and FICA form completion:

• x will issue a corrected 2021 W-2 (W-2C) and will refund the Social Security and/or Medicare taxes associated with the overpayment
  • The W2c process can take 4-6 weeks
• x will adjust the applicable boxes 3, 4, 5, 6
  • Social Security wages/tax withheld and Medicare wages/tax withheld
• x will not adjust boxes 1 or 2 for the Federal taxes
  • Wages, tips and other compensation
  • Federal incomes tax withheld "

I then recieved about 4k in a check. 

Now I would like to amend my taxes to get a refund on the amount I paid back. I spoke to a live turbotax agent and they said that it does not make sense that box 1 for my W2-c is not chnaged. Please advise on how im supposed to proceed. 

Can I reduce the amount I paid back for 2021 or another year despite the box 1 being blank on the W2-C? 

Thanks

[Mike9241]

under the code section 1341 if the repayment is in a year different than received you do not amend the return for the year received. You adjust the return for the year it was repaid in your case 2023

you have two options 

1) take as a deduction on schedule A line 16 denote as IRC 1341 repayment for the $57K OR
2) recompute the taxes in the year you received the payment by reducing the amount in box 1 of the original W-2 by the amount included for the bonus, relocation and taxes imputed on that income - should be the 57K.
the decrease in taxes is taken as a credit on schedule 3 line 13b in 2023

\

see iRS PUB 525

you do not file an amended return for 2021 because only boxes 3-6 were changed. because 

[rehan661262]

Thanks for the answer. 

Another question I have is: I asked for some of the amount to be fogiven and they reduced the amount from 57k->25k. Should I reduce by 57k or 25k? 

Also since I paid back in 2023 I would need to adjust my w2 for that year correct? 

[DianeW777]

Yes, you can only offset your income under Section 1341 for the actual amount of the repayment.  In your case it would be $25,000.

No, you do not adjust your W-2 for 2023 or any previous year.  You report the deduction/adjustment of income on your 2023 return as noted by Mike9241.  The link below will walk you through the steps to enter this in your tax return.  Keep in mind that if you choose to use the credit instead of the deduction you must use TurboTax Desktop version.

• What is a Claim of Right repayment?